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Market Commentary 24/05/16

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EUR/USD – Sell Stops Hit, Price Continuing Lower

The sell stops which I marked on the image in yesterday’s post were hit a couple of hours ago, unfortunately they failed to provide us with a reversal and instead were used by the bank traders to take profits off their own sell positions.

When the sell stops were hit the down-move paused for three candles and then began falling to where it is now. A likely reason as to why the stops did not cause a more significant up-move is because there was a large decrease in how many were placed at the yellow zone over the course of today.

If you compare how many sell stops there was placed at the 1.1175 level in yesterday’s post and how many there were placed the hour before the stops were actually hit you’ll see there is a big difference.

As far as trading opportunities are concerned I would keep an eye on the breakout zone marked on the image. The price has a high chance of moving back into this zone because of the profit taking which is currently entering the market, if a bearish engulf forms when the market is inside the zone it could be the banks placing more sell trades and may signal a resumption of the current downmove.

USD/JPY – Retracement Possible Over Due To Stop Run?

In my last post I marked a box where there was a collection of sell stops building up, a move down earlier today has caused the price to fall into these stops and begin moving higher.

The way the market fell into these stops highlights the importance of waiting for confirmation before trading stop runs. If you had marked the area where the stops were and used a pending order to enter your trade you would have lost money trading this stop run.

After the stops were hit the market still looked quite bearish, another small move higher and a failure to make a new high made it seem as though the price was going to fall again. A drop lower was counteracted by the appearance of a large bullish engulfing candle. The engulf has pushed the market up over the past several hours and its possible for this move up to signal the end of the retracement if the high of the down-move is broken.

Tomorrow watch for a retracement to take place on this current up-move, we need more structure to from in order for us to find a potential entry long, as it stands we have a demand zone which was created by the bullish engulf although I doubt the market will drop all the way back down here just to move back up again.

The supply zone is another thing we need to keep an eye on, this supply was formed by the drop which created the retracement, there’s a chance the retracement was caused by banks selling to cause the market to reverse back in the direction of the downtrend. If this is the case then the move up we’re seeing now could simply have been created in order to generate enough buy orders for the banks to place more sell trades so we need to watch the price action closely if the market returns to this zone.

AUD/USD – More Signs Of Profit Taking Entering The Market

The price failed to enter the supply zone identified in yesterday’s post and instead moved lower late last night and early this morning.

The past couple of hours has seen the price make a sharp move higher, if the market continues to rise up near today’s open it will mean today’s candle would be a bullish pin bar, this may be the beginning of larger retracement higher but we must wait to see if this turns out to be the case.

The demand zone created by the move higher is a place to look for an entry long so long as a clearly obvious bullish engulf forms inside the zone, the engulf must be big and the candle it engulf must be a large bearish candle. If only a small engulf forms do not take the trade.

Finding Supply & Demand Zones That Work!

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Why The Time It Takes For The Market To Return To A Supply Or Demand Zone Will Determine Weather The Zone Has A High Chance Of Causing A Reversal To Take Place

The Differences Between Zones Created By Bank Traders Taking Profits And Zones Created by The Bank Traders Placing Trades